Disposal of DGSB stake fails to excite OMESTI-WB
Alan Voon 
Omesti holds stakes in Diversified Gateway Solutions Bhd, Microlink Solutions Bhd and and Ho Hup Construction Co Bhd

THE share price of Omesti Bhd failed to react significantly to the company’s announcement that it was disposing 290 million shares or 21.39% stake in its listed subsidiary Diversified Gateway Solutions Bhd (DGSB) to Insas Technology Bhd (ITB) and its directors Datuk Dr Tan Seng Chuan and Datuk Wong Gian Kui.

The disposal was for a cash consideration of RM13.78 mil or 4.75 sen per share. While the share price of DGSB surged to as high as 10 sen – more than double the disposal price – the price of Omesti’s share and warrant remained lacklustre having closed on Nov 8 at 48 sen and six sen respectively.

Omesti Group is a leading technology player that brings together a diverse range of enterprise and as-a-service solutions for Infrastructure (IaaS), Platform (PaaS) and Software (SaaS) with the appropriate skillsets to serve multiple industries within the private and public sectors.

The businesses within the group are organised along three broad business lines of business performance services; digital & infrastructure services, and trading & distribution services.

Omesti also holds stakes in a few listed companies, including subsidiaries Microlink Solutions Bhd and Diversified Gateway Solutions Bhd as well as substantial stake of 13.3% in Ho Hup Construction Co Bhd.

Following the disposal of a 21.39% stake in DGSB, Omesti’s equity interest in DSGB fell to 22.06% from 43.45%. However, Omesti said it still regards DGSB as its subsidiary given it still holds significant control over DGSB.

Omesti’s stake disposal was strategic as it represents an opportunity to invite ITB as a shareholder of DGSB given the latter’s track record as a reputable investor. ITB was one of the founding shareholders of Inari Amertron Bhd, a super-star technology company listed on Bursa Malaysia.

In the first quarter (Q1) of FYE3/18 ended June 30, Omesti narrowed its net loss to RM460,000 from RM3.57 mil in Q1 the previous year.

Its revenue was also 6% lower, at RM89.19 mil against RM94.96 mil in Q1 FYE3/17 due to lower order fulfillments during the quarter. Despite lower revenue, net loss for the group was lower due to higher margin recorded by its business performance services segment.

Omesti stated in its results notes that although the group’s sales pipeline remains robust and encouraging, its board of directors is nevertheless mindful of the challenging business environment and is cautiously optimistic of the group’s financial performance for the current financial year.

OMESTI-WB will be expiring in about six months. With the warrant trading at a relatively high premium of 16.7%, this means that the mother share price needs to rise by more than 17% before next May in order for its warrant holders to break even at current prices.

With the sale of DGSB to ITB, many maybe hoping that ITB can rejuvenate DGSB by bringing back more value to Omesti. Traders who subscribed to such idea may take a speculative position on OMESTI-WB although longer term investors are better off buying the mother share directly. 

The writer is CEO of Warrants Capital Sdn Bhd

This article first appeared in Focus Malaysia Issue 258.